Riskiness of portfolios b/w riskiness of individual asset, Financial Management

Why does the riskiness of portfolios have to be looked at differently than the riskiness of individual assets?

The riskiness of portfolios has to be seemed to be at differently than the riskiness of individual assets for the reason that the weighted average of the standard deviations of returns of individual assets doesn't result in the standard deviation of a portfolio containing the assets.  There is a reduction in the dissimilarities of the returns of portfolios which is called the diversification effect.

 

 

Posted Date: 6/17/2013 2:20:55 AM | Location : United States







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